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Australia’s trade surplus hits record heights

In somewhat related but partly contrary news, Australia’s total trade surplus hit record levels in June 2019. Fuelled by iron ore prices and expansion of the LNG export market, exports far outstripped imports. As the ABC’s Michael Janda observed, the export growth has come despite the trade war between China and the USA.

The result has been that Australia is exporting more to both countries, as they duke it out, with Australia recording 18 consecutive monthly trade surpluses.

But as Janda also observes, we need to exercise some caution on the trade front. Booming exports are one thing, but its is not all good news when our imports decline. There was for example, a 9% decline ($600 million) in capital goods imports. As Janda said:

“This is the machinery and equipment that firms import to assist in their businesses and a fall in this category can signal weakness in investment and expansion, ultimately meaning lower economic and employment growth.”

That is a significant issue for an economy that is struggling to translate opportunities into productivity and ultimately into national wealth.

When we consider imports of building materials, like sawn softwood and other products had to rise during the most recent housing expansion, we need to keep in mind, as this data tells us, that the economy is a finely tuned and subtle instrument.

If new equipment and capacity is not installed in a timely manner during downturns, how will the domestic sector compete with imports in the next upswing?

 

 

Posted Date: August 29, 2019

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